21 Oct 2020
Omnibus Bill Gives Commercial Courts Jurisdiction in Competition Appeals and Overhauls Sanctions

This is the fifth in our series of ABNR Legal Updates on the Job Creation Bill that was passed by Indonesia’s House of Representatives on Oct. 5 and sent to President Joko Widodo for signing on Wednesday, Oct.15. Today, we look at the changes it makes to Indonesia’s competition/antitrust regime.

Indonesia was one of the first Southeast Asian countries to adopt comprehensive fair-competition legislation in the form of the 1999 Competition Law,[1] which was enacted in the wake of the Asian Financial Crisis of 1997/1998. A Bill to amend the Competition Law has been before the House of Representatives (Dewan Perwakilan Rakyat / “DPR”) for some time, but its progress appears to have stalled.

While some of the amendments to the Competition Law effected by the Job Creation Bill (“JCB”),^[2] or “Omnibus Bill” as it is often dubbed, are quite significant, they do not address important substantive issues, such as a shift from post-merger notification to pre-merger notification (as proposed in the Bill currently before the DPR). Consequently, we may assume that the competition provisions of JCB are intended to serve as stopgap measures until the proposed new legislation can be enacted by the DPR.

Overall, the key changes brought about by JCB in the competition arena may be summarized as follows:

A. Transfer of Jurisdiction to Commercial Courts

Only five articles of the Competition Law are affected by JCB, namely, Articles 44, 45, 47, 48 and 49, with the most significant change being that Jurisdiction to hear appeals against rulings of the Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha / “KPPU”) is transferred from the general district courts to the more specialized commercial courts.

The country’s commercial courts were established in 1998 as chambers of the existing district courts. The overall idea at the outset was to develop specialized courts with competent, well-trained judges to handle complex business disputes and issues. However, prior to the transfer of jurisdiction over competition appeals by JCB, the purview of the commercial courts was primarily confined to intellectual property and restructuring & insolvency matters.

In addition to a change in jurisdiction, JCB also repeals the maximum 30-day time limits for the handing down of judgment in appeals against KPPU rulings to the district courts (read: commercial courts) and the Supreme Court. This is to be welcomed as the previous limits were unduly short and could militate against the proper and detailed consideration of appeals.

B. Changes to Sanctions

1. Maximum administrative penalty of IDR 25 billion repealed

The upper limit of IDR 25 billion on administrative penalties (approx. USD 1,700,000[3]) under Article 47(2)(g) Competition Law has been repealed. Accordingly, violations of the Competition Law, including late merger fillings, could henceforth result in higher penalties.

2. Role of criminal law curtailed

Prior to the enactment of the Job Creation Bill, a wide range of prohibited actions or agreements under the Competition Law were subject to criminal sanctions.[4] By contrast, the role of the criminal law has been significantly curtailed by JCB, which confines criminal sanctions to incidences of refusal to cooperate with a KPPU investigation, something that carries a maximum fine of IDR 5 billion (approximately USD 340,000) or a maximum prison term of one year (should the fine not be paid).

3. Power to impose additional sanctions in criminal cases repealed

The additional sanctions that could be imposed for criminal offenses under Article 49 Competition Law have been abolished. These sanctions included:

1. revocation of business license;
2. prohibition from serving as director or commissioner for a minimum of 2 years and maximum of 5 years;
3. order to cease certain activities or acts that could result in losses to third parties.

ABNR Commentary:

From the purely legal perspective, it would have been more logical to transfer the jurisdiction of the district courts over competition appeals to the administrative courts, given that the latter are charged with adjudicating disputes over administrative decisions by government and its agencies that prejudice private individuals and entities.

However, from the practical perspective, it makes sense for appeals to go to the commercial courts, whose judges receive special training on business law and practice. It is to be hoped that this training will be expanded and intensified so as to equip them with the knowledge they need to handle competition appeals.

As regards the question of penalties, a Government Regulation will now need to be issued to put the new rules into effect. It will be interesting to see how this regulation addresses how penalties are assessed, given that there have frequently been suggestions that these should be based on a percentage of revenue generated by illegal activity or even a percentage of general annual turnover. The changes made to the Competition Law by JCB provide an opportunity for the introduction of these types of penalties.

Another intriguing question is how the KPPU will respond to the abolition of the upper limit on administrative penalties. Will it be a case of “the sky’s the limit” going ahead? Only time will tell.

Contact us

Should you have any queries on the above or require legal advice as to how you can best protect your interests during this time of uncertainty, please contact the persons below, call us on +6221-2505125 or email us at info@abnrlaw.com.

Mr. Emir Nurmansyah (enurmansyah@abnrlaw.com)

Mr. Nafis Adwani (nadwani@abnrlaw.com)

Mr. Agus Ahadi Deradjat (aderadjat@abnrlaw.com)

[1] Undang-Undang Republik Indonesia Nomor 5 Tahun 1999 Tentang Larangan Praktek Monopoli dan Persaingan Usaha Tidak Sehat

[2] Rancangan Undang-undang Tentang Cipta Kerja

[3] At current exchange rate of IDR 14,700 per USD

[4] The full list is as follows: a. oligopoly and oligopsony; b. price fixing and retail price maintenance; c. market allocation; d. boycott; e. cartel; f. trust (i.e., combination of business actors arranging production or marketing); g. vertical integration; h. closed agreement; i. agreement with overseas parties; j. monopoly; k. monopsony; l. abuse of dominant position; m. cross-shareholding; n. merger, consolidation or acquisition that may cause monopolistic practices and unfair competition; o. tender fixing; p. collusion with third party to obtain confidential information on competitor; q. interlocking directors and commissioners; r. other restrictive practices (i.e., barring competitors from entering the market, barring customers from doing business with competitors, limiting distribution or marketing of products and discriminatory or predatory pricing); s refusal to cooperate with a KPPU investigation, refusal to disclose information deemed necessary for the investigation and obstruction of an investigation or examination.

This edition of ABNR News and the contents hereof are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained herein. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.